Should Value Investors Buy Arcos Dorados (ARCO) Stock?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One stock to keep an eye on is Arcos Dorados (ARCO). ARCO is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 11.59 right now. For comparison, its industry sports an average P/E of 23.23. ARCO's Forward P/E has been as high as 17.05 and as low as 10.55, with a median of 13.06, all within the past year.
We also note that ARCO holds a PEG ratio of 1.02. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ARCO's PEG compares to its industry's average PEG of 1.65. ARCO's PEG has been as high as 1.62 and as low as 0.36, with a median of 1.23, all within the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. ARCO has a P/S ratio of 0.53. This compares to its industry's average P/S of 0.96.
Finally, investors should note that ARCO has a P/CF ratio of 7.13. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. ARCO's current P/CF looks attractive when compared to its industry's average P/CF of 17.91. ARCO's P/CF has been as high as 8.07 and as low as 5.42, with a median of 6.67, all within the past year.
El Pollo Loco (LOCO) may be another strong Retail - Restaurants stock to add to your shortlist. LOCO is a # 2 (Buy) stock with a Value grade of A.
Additionally, El Pollo Loco has a P/B ratio of 1.23 while its industry's price-to-book ratio sits at -23.97. For LOCO, this valuation metric has been as high as 1.69, as low as 0.95, with a median of 1.22 over the past year.
These are just a handful of the figures considered in Arcos Dorados and El Pollo Loco's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ARCO and LOCO is an impressive value stock right now.
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
